SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
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FORM 10-Q/SB
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2000
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from _________________ to _________________
Commission file number
ARTIBLES, INC.
(Exact name of registrant as specified in its charter)
Michigan 38-3321841
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4090 Lake Drive,SE, Grand Rapids, Michigan 49506
(Address of principal executive office) (zip code)
Registrant's telephone number, including area code: (616)-285-1690
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes __ No_x__
7,839,975 shares, $.01 par value, as of September 30, 2000
(Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date)
Financial Statements. The following financial statements are included
In this statement:
Accountant's Report
Balance Sheets - September 30, 2000
Statements of Operations and Accumulated Deficit
For the 3 months ended September 30, 2000
Statement of Changes in Stockholders' Equity (Deficit)
For the 3 months ended September 30, 2000
Statement of Cash Flows
For the 3 months ended September 30, 2000
Notes to Financial Statements
THOMAS BAUMAN
CERTIFIED PUBLIC ACCOUNTANT
4 SCHAEFFER STREET
HUNTINGTON STATION, NY 17746
Telephone (631) 427-4789
Fax (631) 424-3649
To the Board of Directors and Shareholders
Artibles, Inc.
Grand Rapids, MI
ACCOUNTANT'S REPORT
I have reviewed the accompanying balance sheet of Artibles, Inc. (a
development stage company) as of September 30, 2000 and the related
statements of income and retained earnings, and cash flows for the
three months ended, in accordance with the Statements on Standards for
Accounting and Review Services issued by the American Institute of
Certified Public Accountants. All information included in these
financial statements is the representation of the management of
Artibles, Inc.
A review consists principally of inquiries of Company personnel and
analytical procedures applied to financial data. It substantially less
in scope than an examination in accordance with generally accepted
auditing standards, the objective of which is the expression of an
opinion regarding the financial statements taken as a whole.
Accordingly, I do not express such an opinion
Based on my review, I am not aware of any, material modifications that
should be made to the accompanying financial statements in order for
them to be in conformity with generally accepted auditing principals.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As shown in the
financial statements, the Company has incurred net losses since its
inception. These losses, and limited capital resources, raise
substantial doubt about its ability to continue as a going concern.
Management's plan regarding those matters are described in Note 1.
These financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ Thomas Bauman
Thomas Bauman, C.P.A.
December 28, 2000
ARTIBLES, INC.
(a development stage company)
BALANCE SHEET
September 30, 2000
(Unaudited)
ASSETS
CURRENT ASSETS
Cash (Note 1) $ 16,429
PROPERTY AND EQUIPMENT
At cost, less accumulated
Depreciation of $13,189
(Note 1) 9,311
ORGANIZATION COSTS, less accumulated
amortization of $3,419(Note 1) 1,841
TOTAL ASSETS $ 27,581
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable 33,221
Due to Related Party (Note 5) 23,000
Interest Payable 48,750
Total Current Liabilities 104,971
--------
STOCKHOLDER'S EQUITY (DEFICIT)
Common Stock ($.01 - 10,000,000
Shares authorized; 7,839,975 issued and
Outstanding) 1,969,325
Deficit accumulated during
development stage (2,046,715)
Total Stockholder's Equity (77,971)
TOTAL LIABILITIES AND STOCKHOLDER'S
EQUITY $ 27,581
===========
See accompanying notes are an integral part of this statement
See Accountant's Review Report
ARTIBLES, INC.
(a development stage company)
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
For the Three Months Ended September 30, 2000
(Unaudited)
Revenue $ -0-
General and Administrative Expenses
Marketing (Note 6) 17,500
Professional Fees 3,500
Insurance 6,169
Miscellaneous 690
Depreciation and amortization 1,388
--------
Total General and Administrative Expenses 29,247
Other Expenses
Interest 5,229
Net Loss (34,476)
Accumulated Deficit - Beginning of Year (2,012,239)
Accumulated Deficit - End of Year (2,046,715)
============
See accompanying notes are an integral part of this statement
See Accountant's Review Report
ARTIBLES, INC.
(a development stage company)
Statement of Changes in Stockholders' Equity (Deficit)
For the Three Months Ended September 30, 2000
Number of Common Accumulated
Shares Stock Deficit
Balance as of July 1, 1998 7,761,085 1,808,325 2,012,239
Net Loss for the year ended \ 34,476
Issuance of Common Stock 787,788 1,554,000
---------- ---------- ----------
Balance as of September 30,2000 7,839,975 1,969,325 2,246,715
See accompanying notes are an integral part of this statement
See Accountant's Review Report
ARTIBLES, INC.
(a development stage company)
STATEMENT OF CASH FLOWS
For the Years Ended September 30, 2000
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $ (34,476)
Adjustments to reconcile net
loss to net cash provided by
operating activities: 1,388
Depreciation
Increase (Decrease) on liabilities
Accounts Payable 2,009
Due to a Related party (109,000)
---------
NET CASH (USED) BY OPERATING ACTIVITIES (144,097)
Cash Flows from Investing Activities:
Issuance of Common Stock 161,000
--------
NET CASH PROVIDED BY FINANCING ACTIVITIES 161,000
NET (DECREASE) INCREASE IN CASH 16,903
BANK OVERDRAFT AT SEPTEMBER 30, 2000 (474)
CASH AT SEPTEMBER 30, 2000 16,429
=========
Supplemental Cash Flow Information:
Cash paid for interest was $5,229 for the three months ended September 30, 2000.
Significant Noncash Investing and Financing Activities:
Debt converted to Common Stock was $161,000 for the three months ended September
30, 2000.
See accompanying notes are an integral part of this statement
See Accountant's Review Report
ARTIBLES, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
Note 1 - Nature of Business and Liquidity:
Artibles, Inc., (the "Company") was incorporated in the state of
Michigan in 1996. The Company is a development stage company that is
developing an electronic worldwide distribution channel for art and
collectibles utilizing Internet-ready TV set-top boxes and
proprietary intranet for use by individual and business subscribers.
The proprietary intranet is being developed with the objective of
providing users secure electronic commerce using smart card
technology.
The Company anticipates earning revenues in the form of advertising
fees, computer equipment and software rental, and commission on
consignment sales and auctions.
The Company is in the development stage and has not yet acquired the necessary
operating assets, nor has it begun any part of its proposed business. While the
Company is negotiating with prospective personnel and potential customer
distribution channels, there is no assurance that any benefit will result from
such activities. The Company will not receive any operating revenues until the
commencement of operations, but will continue to incur expenses until then. From
its inception through September 30, 2000, there has been no revenue earned and
the Company has incurred substantial losses from operations, which have amounted
to approximately $2 million on a cumulative basis. These losses, which include
the
costs for development of products for commercial use, have been funded by the
conversion of debt to common stock. Management believes that currently available
funds will not be
sufficient to sustain the Company at present levels for the next 12 months. The
Company's ability to continue as a going concern is dependent on funding from
outside parties, and cash inflows to be generated from the Company's revenue
sources. The level of realization of funding from the Company's revenue sources
is presently uncertain. If the revenue sources do not generate sufficient cash,
management believes additional working capital financing must be obtained.
There is no assurance any such financing is or would become available. In the
event that funding is insufficient, the Company would have to substantially cut
back its level of spending which could substantially curtail the Company's
operations.
Management plans to raise sufficient capital through an initial private
placement to fund current obligations and to provide for the remaining
development of software and distribution systems necessary to begin operations.
Operations are expected to commence in January of 2001.
See Accountant's Review Report
- - -6-
ARTIBLES, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern, which contemplates continuity
of operations, realization of assets and satisfaction of liabilities in the
ordinary course of business. The propriety of using the going concern basis is
dependent upon, among other things, the achievement of future profitable
operations and the ability to generate sufficient cash from operations, public
and private financings and other funding sources to meet its obligations. The
uncertainties described in the preceding paragraphs raise substantial doubt at
September 30, 2000 about the Company's ability to continue as a going concern.
The accompanying consolidated financial statements do not include any
adjustments relating to the recoverability and classification of the carrying
amount of recorded assets or the amount and classification of liabilities that
might result should the Company be unable to continue as a going concern.
Note 2 - Summary of Significant Accounting Policies:
Cash and Cash Equivalents
The Company considers all short-term, highly liquid investments that are readily
convertible into known amounts of cash and have original maturities of three
months or less to be cash equivalents.
Organization Costs
Costs relating to the general organization of the Company were deferred at
inception. Such costs are being amortized over five years.
Income Taxes
The Company accounts for income taxes under the asset and liability method as
required by Statement of Financial Accounting Standards (SFAS) No. 109,
Accounting for Income Taxes. Under the asset and liability method, deferred
income taxes are recognized for the tax consequences of "temporary differences"
by applying enacted tax rates applicable to future years to differences between
the financial statements carrying amounts and the tax bases of existing assets
and liabilities. Under SFAS No. 109, the effect on deferred income taxes of a
change in tax laws or rates is recognized in income in the period that includes
the enactment date.
A valuation allowance reduces deferred tax assets when it is "more likely than
not" that some portion or all of the deferred tax assets will not be realized.
See Accountant's Review Report
- - -7-
ARTIBLES, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
Property, Equipment and Depreciation
Property and equipment are stated at cost. Significant additions or
improvements extending asset lives are capitalized; normal maintenance and
repair costs are expensed as incurred. Depreciation is computed on the straight
line method over five years for financial reporting purposes.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
Note 3 - Interest Payable
The Company had interest payable in the amount of $48,750 at June 30, 2000. The
amount represents accrued interest on $500,000 in convertible notes at a rate of
9.75% per annum. The notes were converted to shares on June 14, 2000.
Note 4 - Development Costs
Costs incurred to develop software technologies internally are expensed, as
incurred, as development costs until technological feasibility is established.
Based on the Company's development process, technological feasibility occurs
upon the completion of a working model. The Company has not capitalized any
software development costs to date.
Note 5 - Related Party Transactions
Epoch Resources ("Epoch") provides marketing, electronic commerce and web
development services to the Company. The services totaled $17,500 for the three
months ended September 30, 2000.
The Company paid $122,510 to Epoch in the three months ended September, 2000
for services rendered in the fiscal years ended June 30, 2000 and 1999. On
May 17, 1999, the Board of Directors of the Company resolved to
convert $800,000 of accounts payable to Epoch into common stock.
As of September 30, 2000, the Company owed Epoch $23,000. The Chief Executive
Officer
and majority stockholder of Epoch is also the Chief Executive Officer, Chairman
of the Board and 51% equity owner of the Company. The President of the Company
is also a minority stockholder of Epoch.
Note 6 - Income Taxes
_____________________
As a result of net operating losses, the Company has not recorded a provision
for income taxes. The components of the deferred tax assets and related
valuation allowance at September 30, 2000 are as follows:
Deferred tax assets:
Net operating loss carryforwards $ 37,898
Less: valuation allowance 37,898
Net deferred taxes $ -0-
Based on management's assessment, the Company has placed a valuation allowance
against its otherwise recognizable deferred tax assets due to the likelihood
that the Company may not generate sufficient taxable income during the
carryforward period to utilize the net operating loss carryforwards.
At September 30,2000, the Company has net operating losses for federal and state
income tax purposes of approximately $1,423,925, which begin to expire in 2020.
The net operating losses can be carried forward to offset future taxable income.
Utilization of the above carryforwards maybe subject to utilization limitations,
which may inhibit the Company's ability to use carryforwards in the future. As
a result of net operating losses, the Company has not recorded a provision for
income taxes.